LTIMindtree, Persistent lead mid-cap revenue as regulatory costs hit bottom lines in Q3

Bengaluru: Two of the country’s mid-sized information technology (IT) services companies, LTIMindtree Ltd and Persistent Systems Ltd, beat analyst expectations, mirroring the performance of the big five IT services companies during the October-December 2025 quarter.

However, both LTIMindtree and Persistent Systems have guided for much faster growth in the current January-March 2026 period, in contrast to the caution outlined by their larger peers.

The country’s ninth-largest information technology (IT) services company ended the October-December 2025 period with $422.5 million in revenue, up 4.01% sequentially and 17.3% on a yearly basis. More than a third of this growth came from banks and financial institutions.

On the other hand, larger peer LTIMindtree ended last quarter with $1.2 billion, up 2.4% on a quarterly basis and 6.1% from a year ago. Unlike Persistent, three-fourths of its growth was led by manufacturing companies, which make up a fifth of its total business.

The third quarter is seasonally weak because it has fewer billing days due to holidays.

For now, both companies exceeded analyst expectations.

Four brokerages expected LTIMindtree to report average revenue growth of 2.2%, whereas the same number of brokerages expected Persistent Systems to report a sequential revenue growth of 3.1%.

The two companies fared better than four of the big five. Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, Wipro, and Tech Mahindra reported $7.51 billion, $5.1 billion, $3.79 billion, $2.64 billion, and $1.61 billion in revenue, up 0.6%, 0.5%, 4.1%, 1.2%, and 1.5% respectively, sequentially.

Growth ahead

LTIMindtree does not provide guidance, but the company is confident it will continue its growth momentum.

“As we look ahead, we expect the growth momentum delivered over the last three quarters to continue through the balance of the year. This confidence is supported by our execution discipline, improved deal momentum, and the traction we are seeing across our AI-led offerings,” said Venu Lambu, chief executive of LTIMindtree, during the company’s post-earnings analyst call on 19 January.

Persistent Systems’ management shared a similar view, adding that the company is eyeing more business from data modernization projects at hospitals and banks.

“The good part is that we saw in the last three to four months a significant amount of discussions on application and data modernization when it came to healthcare life sciences, or BFSI (banking, financial services, and insurance). We also saw in healthcare life sciences a good amount of discussions on transformation programmes in mid to large firms,” said Sandeep Kalra, chief executive of Persistent Systems, during the company’s post-earnings analyst call on Tuesday.

This is in contrast to the top five, each of which was more cautious about the demand environment. They are expected to grow in the low single digits for the third straight year, with the third-largest, HCL Technologies, expected to grow the fastest. The company is expected to grow at best 4.5%, according to its commentary.

None of the mid-cap IT outsourcing companies provides quarterly or full-year revenue guidance.

Profitability poser

Even as the mid-sized IT outsourcers sounded more sanguine than their larger peers, profitability remained a concern.

Persistent Systems reported 14.4% in operating margins, down 190 basis points primarily on account of the Union government’s labour codes, which raise the basic pay for employees and thereby translate to higher costs for companies. The company incurred an exceptional cost of ₹89 crore.

On the other hand, LTIMindtree faced an impact of ₹590 crore on its profitability due to labour codes. This takes the total tally of labour codes' impact on seven of the top 10 IT outsourcers to $575 million.

Discounting the impact of these codes, its margins jumped 20 basis points sequentially to 16.1%. This was mainly due to its internal cost-reduction plans and favourable currency movements. To be sure, the company’s margins do not reflect the one-time cost incurred under the labour codes. Factoring in the labour code impact, LTIMindtree’s operating margins total 10.6%.

Its net profit rose 0.1% to $150 million, whereas Persistent’s net income fell 6.8% sequentially to $48.3 million.

For now, both companies refrained from sharing revenue from AI, but said they had gained more market share because of the technology. However, it appears LTIMindtree is more impacted by the new technology, as it expects revenue declines from its biggest clients.

“So every customer goes through its productivity journey because nobody is sitting quiet when it comes to what can be done on AI or the existing book of business. And that is what we are helping customers proactively in going through that journey. And if you look at the top five, (they) are the really material accounts with a sizable revenue. So unless all five clients complete their journey, we will have to live through this short-term decline in that bucket,” said Lambu.

Brighter future

Shareholders took notice as its shares fell 6.7% to ₹5,977.85 at close on Tuesday.

However, at least one brokerage expects better days ahead for LTIMindtree.

“We believe LTIM has begun its journey to accelerate revenue growth and improve margins after the new CEO was appointed. In FY26F, we think, the timely ramp-up of already-won large deals, and closure of a few deals in the pipeline should help the company post dollar revenue growth of 6.5% (vs 4.8% in FY25),” said Nomura analysts Abhishek Bhandari and Karan Nain, in a note dated 19 January.

In terms of headcount, LTIMindtree and Persistent Systems added 1,511 and 487 employees, respectively, to end with 87,958 and 26,711 employees, respectively.